Alaska pipe project to miss deadline

Posted: Tuesday, March 08, 2011

By BECKY BOHRER

JUNEAU — Another major natural gas pipeline project in Alaska is expected to miss a self-imposed deadline for securing agreements with shippers.

Scott Jepsen, vice president for business services with Denali-The Alaska Gas Pipeline, told The Associated Press on Monday that the project is not likely to have agreements in place by the end of the first quarter, as hoped.

While Denali’s website sets a goal of shippers agreeing to the pacts by Feb. 1 and Denali signing the precedent agreements by March 3, officials in recent months have backed off from that and given the first quarter as their target for reaching agreements.

Jepsen said negotiations have taken longer than expected. While talks continue, Jepsen said no agreements have been signed with any of the possible shippers who had earlier expressed interest in the multi-billion dollar Denali project, a joint venture of BP and ConocoPhillips.

Officials will evaluate the next step if or when talks reach an impasse. Jepsen noted that the project is market-driven and that it’s not clear yet whether it will have the support needed to move forward.

For years, Alaskans have dreamed of a gas line as a way to help shore up revenues as oil production declines, create jobs and provide a more reliable source of energy. But the world has changed since the passage of the Alaska Gasline Inducement Act, pushed by then-Gov. Sarah Palin as a way to get a project moving, and some lawmakers question whether a big line will get built within the next decade, or at all.

Since the act’s passage, the U.S. has endured an economic slump, gas prices haven’t been high relative to oil and there’s no been shortage of gas on the market, leaving companies to weigh the competitiveness of Alaska’s gas against, as an example, North American shale.

A competing project, being pursued by TransCanada Corp., failed to meet its target of having agreements signed by the end of last year. While that wasn’t an official deadline, the fact that it came and went without some sign that a line is feasible put already-antsy lawmakers further on edge: Unlike Denali, TransCanada, which is working with Exxon Mobil Corp., is moving ahead with the promise of up to $500 million in state support as part of its exclusive license under the inducement act.

At least seven House Republicans have signed on to legislation that would abandon the state-sanctioned effort absent proof in the next few months that such a line is economic. However, House Democrats and Republican Gov. Sean Parnell have expressed a desire to see the current process through, and the federal coordinator for Alaska gas pipeline projects has urged lawmakers to be patient.

One of the bill sponsors, House Speaker Mike Chenault, said Monday he’s not sure how aggressively he’ll push the bill. He said he needs to meet with other members of the House to determine what they’d like to see done. “If they think it’s important,” he said, “then I’ll push it as hard as I can.”

Denali has estimated its project will cost $35 billion while TransCanada has put its figure at $20 billion to $41 billion, depending on the route. Both have proposed plans to be in service by about 2020 and deliver about 4.5 billion cubic feet of gas per day from Alaska’s North Slope to North American markets by larger lines to Canada.

TransCanada has also proposed a shorter, cheaper option that would lead to a liquefied natural gas facility that could export fuel by ship.